Capital costs of banks
However, economists expect that this fear will be alleviated after the local elections. The reason behind this expectation is that there has been a significant decrease in the interest rates since they reached peak in September and October and that the loans market is getting out of rock bottom in comparison with the base levels in February. At the same time, the US Federal Reserve leaving the interest rate ountouched in its meeting on March 20 and announcing that it will likely not increase the rate in 2019 is expected to reflect positively on countries like Turkey. Another factor that has caused the markets to relax is the fact that the Fed has announced plans to end balance sheet runoff in September. These statements have already had a relaxing effect on US and global interest rates. The US 10-year bond yields fell to 2.49 from 2.62 and then fluctuated near the 2.50 level. After the Fed announced that it would leave key lending rates untouched, the London interbank offered rate (LIBOR) to borrow dollars for one-year fell to 2,85 from 2,81. The LIBOR rate had risen to as high as 3.15 percent in the start of the year. The concrete benefit by the Fed’s decision to leave lending rates unchanged actually comes from its contribution to the actual Libor rate. In other words, the capital costs of Turkish banks are falling.
Will loan activity be suf
On the credit side, loans issued by Turkish banks which decreased after August have started to increase again after hitting the lowest level in early February. As such, over the last 1.5 months, the total amount of loans has increased by 77 billion lira.
Experts note that special loan packages offered primarily by public banks to revive the economy have contributed to the rise in the overall amount of loans and in the fall of interest rates. A quick look at the data reveals that on Feb 1, the amount of loans issued to domestic borrowers which stood at 2 trillion 248 billion liras on Feb 1 increased 2 trillion 326 billion as of Feb 15 by 77 billion lira (a 3.4 percent increase). According to senior banking executives, this increase in loans will continue on through March and April. So, are these levels of credit growth, which is vital to the economy, sufficient or will they last?
According to experts, looking at the current picture, it is possible to say that the economy is now going back up after hitting the bottom. At the same time, budget and workforce data indicate that the recovery will be more challenging than expected. In other words, the macro leap in the second half of the year will be weak and will not be felt strongly. Analysts say, therefore, the exchange rate remaining stable and the disinflationary trend this will bring about are of vital importance.